Every system is perfectly designed to get the results it gets.
– Dr. W. Edwards Deming, Statistician, economist, author, and business visionary
Designing your business to achieve the expected outcomes is more difficult than one would expect. Years ago, a company could compete in the market by simply being more efficient internally with their product or service. Not so today. Today, one must not only be efficient, but also offer additional services or products that differentiate itself from its competitors.
In the mid-1970s, the computer giant we know today as Microsoft was a fledgling company, determined to design the best computer interface possible. From the beginning, Microsoft gave itself an edge by designing an Operating System (OS) that was powerful and user-friendly. Beginning with BASIC then MS-DOS, and eventually to MS Windows that we all know today, Microsoft continues to develop industry-leading platforms that changed the way technology interfaces.
But for Microsoft, a premier OS was not enough, they expanded their offering to production software, gaming, technical tools, and many other cloud-based products. As Microsoft continues to be a strong competitor, they are constantly looking ahead, designing products that uniquely satisfy a market demand in a distinct way while also constantly improving the internal operational efficiencies of the business. This blend of operational efficiencies with differentiated positioning is what gives Microsoft a strong competitive advantage and is the lynchpin of their massive success.
Outcomes of system design
Your business may not be at the level of Microsoft, but the same rules apply. Your results are the precise outcomes of how your business is designed. If you’re not experiencing your desired results, it would benefit you to look at the design of your organization.
When the marketplace evolves or your competitor comes out with a new offering, do you react to those changes, or do you stay the course with your current strategy? When brilliant players play chess, they don’t think of the next move; they think three, four, or ten moves ahead. Only through anticipation and careful planning do they win the game. It can be helpful to think of the concept of competitive advantage in the same way – as a process with steps to follow.
Gaining and keeping the strategic advantage
At the 2019 Organization Design Conference in NYC, we discussed Differentiation by Design® concepts with an audience full of business and HR thought leaders and experts. As we described the importance of strategic design, many participants asked when strategic organization design should take place and what are some events that may trigger the need for such an effort. The list below highlights a few ways in which any organization can become misaligned and therefore lose its competitive advantage. The solution is strategic organization design.
- Time and/or company growth. We work with organizations around the world, and a common challenge is that over time the leaders become focused on the production work (running the business) instead of strategic work. It takes effort, thoughtfulness, and discipline to separate competitive work (i.e., additional offerings, strategic enablers) from the necessary work (i.e., payroll, accounting). If you don’t consciously address how work is done in your organization, over time this inattention creates corporate fog due to competing interests over prioritization.
- Understanding trade-offs and knowing when to say “no.” An organization should not necessarily say “yes” to every revenue generating opportunity that surfaces. If you’re in tune with aligning your organization to effectuate your strategy, then you understand the implications of taking on new capabilities and how this impacts all dimensions of your organization, or sides of the cube (see Mastering the Cube). When leaders understand the limitations of their organization, they can help the organization wisely allocate available resources and develop the competitive activities in a way that limits negative impact to the business. Like a good author won’t add in an important character in the final chapter, you should think carefully about adding additional options to your organization unless you’ve completed the proper design and planning.
- Over focusing on operational effectiveness or using operational effectiveness as the strategy. While operational effectiveness is important and worth your attention, you should also focus on differentiated positioning. Determining your unique blend of capabilities that make you different from your competition is critical to maintaining market position. Your customers are like coffee enthusiasts who can taste the difference between beans harvested from Columbia and beans harvested in Asia. By keeping your edge and creating your blend, you offer something to your customers that is uniquely different from the competition.
How to bring strategy back into your organization
I recently visited a business that established a method to work on strategy development. Each week, the company sets aside a few hours for all employees to work on strategy – ways to improve the business in groups or individually. Not only does this company encourage ideas from all levels of the company, but it also created an incentive-based competition for the best ideas. This method proved highly successful because strategic ideas emerged from every aspect of the business, not just the executive team.
Good leaders understand that there are front-line staff who may know more about the strategic implications of how production and processes impact the business. Creating a way for these ideas to come forward allows for more people to think strategically which improves your competitive advantage.
Consider the factors above that cause misalignment and set aside time within your organization to strategically address how you can better align your organization. By doing so, you will deliver the capabilities that will ultimately realize your strategy. And if your strategy contains the proper components, you will get the results you desire for your organization.